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Detroit edges closer to crisis

Sunday, April 10, 2005

Detroit edges closer to crisis

Linda Radin / Special to The Detroit News

Jamela Henderson, 8, of Detroit hangs on the jungle gym at Belle Isle. Detroit officials and residents alike blame a looming budget crisis for shutting down Belle Isle's aquarium.

Amid deficit and painful budget cuts, residents wonder if the city can recover.


DETROIT -- Mark Reynolds feels that the city has left him in the dark.

The 49-year-old Indian Village resident's Dodge Magnum was broken into this winter after streetlights went out in his neighborhood. He doesn't understand why the city won't keep Belle Isle Aquarium open. And he wonders out loud how the mayor will tackle an estimated $342 million budget deficit in possibly the third straight year the city will be in the red.

"It's pretty scary, the scenario that's in front of us, and I don't know that they've come up with the right ideas to address it," Reynolds said. "There have been neighbors who have said just let them go bankrupt so we get professional managers."

Mayor Kwame Kilpatrick on Tuesday will present his plan to avoid that fate in what he and his lieutenants are calling one of the toughest annual budget proposals in the city's history.

With Wall Street, Lansing and increasingly frustrated residents watching for signs of hope, the mayor and his staff say they are confident they can balance the city's books while keeping the streetlights on in the face of high unemployment, continued population decline and rising health care and pension costs.

"The budget reflects the need for the city to right-size itself," said Deputy Mayor Anthony Adams. "We can say there will be further reductions in work force due to attrition and layoffs. That's further recognition of the financial situation we find ourselves in."

Adams declined to specify the number of layoffs. City officials say that when Kilpatrick took office, Detroit had more than 20,000 workers, too many for a city with half the population of 50 years ago. The city now employs fewer than 17,000.

Adams says the mayor is committed to keeping core services but will eliminate and merge some of the city's 43 departments for efficiency.

Already, some residents, analysts and city officials worry that his plans will be insufficient. City Council fiscal analyst Irvin Corley warns that the city may have to resort to borrowing -- as much as $200 million -- to fill the gap.

"What appears to have everyone so frustrated is the inability of the administration to attack this fiscal problem before it got so unmanageable. We earlier stated that this administration has begun a dangerous precedent of not handling deficits when they initially make themselves known," Corley wrote in a recent report.

Chief Financial Officer Sean Werdlow said the budget will not require any borrowing. "Nothing can be further from the truth," he said.

Three weeks ago, Standard & Poor's lowered Detroit's credit ratings to BBB, which is just above junk bond status.

The bond rating agency cited "continued deterioration" of the city and noted that it could face a third consecutive year with a budget deficit.

Detroit is falling while most other major cities are rising: Chicago has an A+ rating; New York, an A; Washington, D.C., an A; and Minneapolis has the highest rating, with AAA.

Longtime residents are quickly losing confidence.

"We've about had it," said Regina Kuper, 58, a resident of Indian Village for 15 years. "We've fought very hard, and we don't see things changing in our lifetime."

Kuper and her husband say they are considering moving to New Orleans, where they have a small business.

The Kilpatrick administration has said it will eliminate general assignment vehicles, restructure employee benefits, explore early-buyout options, consolidate departments and enhance revenue through such things as a prepared food tax.

Such actions, however, will either take a long time to produce savings or face heavy opposition from unions and lawmakers.

He said that the mayor's initial deficit elimination plan has failed to yield half the savings it projected -- and the administration hasn't even begun to address the current year's and next year's budget.

Werdlow says the administration has done everything possible to reduce spending, but expenses were unpredictable. For example, he said health care and pension costs have risen by 15 percent, or $190 million, annually.

"We have been consistently reducing head count. We have done a lot," he said.

The grim outlook has left lifelong Detroiter Elizabeth Parker, 82, worried about blight and trash encroaching on her neighborhood.

"Everybody blames the mayor for everything," Parker said. "He can't do the job himself. But the departments aren't doing their jobs."


You can reach Judy Lin at (313) 222-2072 or jlin@detnews.com.